- The share of orders to buy the USD slid from 61 to 58%
- There are now 72% of traders short the Greenback
- The monthly S1 around 118.93 are the nearest resistance
- Immediate support is around 117.90, represented by the 20-day SMA, the weekly PP and the monthly S2
- 59% of the survey participants expect the US Dollar to cost less than 120.00 yen in three months
- Upcoming events today: US New Home Sales, US Crude Oil Inventories, FOMC Statement, Federal Funds Rate, Japanese Retail Sales
Despite a strong reading of the US CB Consumer Confidence on Tuesday, the Greenback failed to post gains against most major peers, only outperforming the Swiss Franc and somewhat the Japanese Yen. The US currency suffered rather serious losses against commodity currencies, namely 1.21% against the Loonie, 0.70% versus the Aussie and 0.66% against the Kiwi, while also edging 0.70% versus the British Pound, which in turn was boosted by BoE Governor's speech that day. The EUR/USD inched 0.18% higher, while the USD/JPY remained relatively unchanged, climbing only 0.10% higher. The only significant gain was registered against the Swiss Franc, as the Buck added 0.39% against it.
US consumer sentiment rose in January to the highest level since October despite a stock market rout and increase in house prices in November, indicating underlying resilience in the world's number one economy despite a steep growth slowdown in recent months. The Conference Board's index of consumer confidence surged to 98.1 this month from a revised 96.3 in December, whereas economists had predicted a decline to 96.0. Furthermore, expectations index soared to 85.9 in January, up from 83 in the preceding month, though Americans' assessment of current economic conditions was unchanged from December. Consumers seemed to shrug off the recent precipitous plunge in the stock market and signs of economic weakness overseas. The confidence index reached a post-recession high of 102.6 in September. In addition, the report revealed that Americans' outlook for the labour market was also more optimistic. Those expecting more jobs in the coming months climbed 13.2% from 12.4%, while those anticipating fewer jobs fell slightly in January.
However, there are signs the weakness from manufacturing and export-focused industries is starting to filter into the services sector, with the latest data showing activity in that sector dropped to the lowest level in a year in January.
Vatsal Srivastava, director at the Blackwater Consulting, explains why the US Dollar is a advancing against the Yen this week. Even though he says that there was nothing fundamentally driving the USD/JPY on Monday, one of the key drivers is the falling oil prices, which is actually boosting the Yen, in his opinion, as there is an addition cause for more QQE. Vatsal Srivastava also mentions that "it is going to be a hard economic ride ahead and there seems to be no light on the horizon for Japan as of now". "Lets hope for the best," he added.
Federal Funds Rate and US New Home Sales
There are no significant economic data releases concerning the Japanese economy today, thus, all focus shifts to the US fundamentals. First of all, the Federal Funds Rate decision; the Board of Governors of the Federal Reserve announces an interest rate. This interest rate affects the whole range of interest rates set by commercial banks, building societies and other institutions for their own savers and borrowers. It also tends to affect the exchange rate. The rates are expected to be held unchanged, but the FOMC Statement could cause respective volatility, depending on the tone of the statement. Second, the New Home Sales number, which is released by the US Census Bureau and is an important measure of housing market conditions. House buyers spend money on furnishing and financing their homes so as a result the demand for goods, services and the employees is stimulated. Finally, the US Crude Oil Inventories, which measures the change in crude oil storage. Energy prices currently have a great impact on the market and a better-than-expected result is likely to strengthen commodity-based currencies against other major peers.Nonetheless, the Japanese Retail Sales figures are due tomorrow early morning and are likely to set the mood for the Asian session. The Retail Trade is released by the Ministry of Economy, Trade and Industry, it captures the aggregate sales made through a business location (usually a store) in which the principal activity is the sale of merchandise and related services to the general public, for household or personal consumption. Consumer spending is a key important indicator for the Japanese economy. A rather gradual improvement is forecasted, but the figure is still expected to remain negative.
USD/JPY makes efforts to extend gains
The USD/JPY managed to erase daily losses on Tuesday, as a strong reading of the US CB Consumer Confidence boosted the American currency. Even though the pair closed with a 12-pip surge, a relatively tough group of levels is supporting the Buck from below. The 20-day SMA, the weekly PP and the monthly S1 form a cluster around 117.90, whereas the monthly S1 at 118.93 remains the nearest resistance. Technical indicators also changed direction from south-ish to mixed, suggesting a decline is unlikely. Nonetheless, the FOMC statement's tone could cause a breakout of either barrier.Daily chart
After a small three-day rally last week, the USD/JPY currency pair appears to have entered a bearish trend. It is too early to confirm the trend completely, as demand around the 200-hour SMA is relatively strong, which could limit the losses and help the pair regain the bullish momentum within less than a week.
Hourly chart
Bears dominate the market
Other market participants, such as OANDA and SAXO Group, have a completely different sentiment, as the majority of their traders still hold long positions. Among SAXO Bank, 59% of traders remain long the US Dollar, whereas 60% of all positions at OANDA are also long (previously 59%).
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 120 yen
The largest half of the survey participants (59%) expect the US Dollar to cost less than 120.00 yen in three months. The most popular choice is the 114.00-115.50 price interval, selected by 30% of the voters; however, according to the votes collected between Dec 27 and Jan 27, the mean forecast for Apr 27 is 118.79. At the same time, 12% of the surveyed believe the Greenback could fall in the 120.00-121.50 price interval after a three month period.
Participants of the latest quiz for Dukascopy Community Forecasts seem to wait for more negative data to be released, as now almost 54% of votes are set short on the USD/JPY currency pair, widely supporting the Yen.
Among bearish Dukascopy Community members, nuonrg suggests that the pair has retraced last week up into the Fibonacci 50 percent level from the beginning of December 2015. However, "it can push towards the 61.8%," he commented.
Meanwhile, a traders with the nickname raposo2 has a positive outlook towards the USD/JPY. He mentioned that "for the USD/JPY it is likely that the re-test the support will be at 119.00 level."